CHAPTER 8

REPUBLICAN AUSTERITY

The idea that Mexico cannot invest in development for lack of funding has been widely disseminated. This is untrue. Mexico’s public wealth, despite its steady decline throughout the neoliberal period, remains significant. State intervention should not hinder civil society, nor prevent cooperation between the public and private sectors. But it’s another thing altogether to claim that the state cannot meet its responsibility to promote development.

The problem is corruption, not a lack of funds. In 2017, the budget authorized by the Chamber of Deputies was 4.9 billion pesos (US$267.2 million); that is to say, on average 13,000 pesos per month for each family (US$709). However, the vast majority of this budget is not invested in development or public welfare initiatives; rather, it facilitates the transfer of public goods to private hands. The budget is used to maintain an onerous bureaucratic structure that serves the political mafiosi.

A judicious budget is not merely a prudent administrative decision, but a moral imperative. Those in office, as President Juárez said, “must not use funds irresponsibly; they must not govern impulsively, but through measured application of the law; they must not make fortunes nor surrender to idleness and gratification, but dedicate themselves diligently to work, resigned to live honorably off the remuneration provided under the law.” Let me add that there must be no rich public servants so long as the people are poor.

A politics of austerity would allow us—once corruption has been addressed—to invest in the development and the well-being of our people. With this strategy, there will be no need to raise taxes in real terms or to create new taxes; neither would we have to bankroll the state through financing and debt.

How do we do it?

To free up and reassign funds, we would implement the following measures:

We would save 5 billion pesos (US$272.7 million) in interest payments through the following:

1. The government will commit to strengthening our fiscal position by pledging to live within our means by creating balanced budgets.
2. Fostering trust in the safety of investments; their profits will create a climate more conducive to lowering interest rates and securing more attractive refinancing terms.
3. The reduction we propose is very conservative. Consider this: in September 2016, the net public debt of the Public Sector Budget was 9.2 trillion pesos (US$501.8 billion), and nearly 480 billion pesos (US$26.1 billion) would go toward interest, commissions, and debt spending by the year’s close. The official 2017 budget allocates 568 billion pesos (US$30.9 billion) toward these expenses.
4. Throughout the negotiations to restructure the federal debt, the Bank of Mexico will take an active role as the financial agent and advisor to the federal government.
5. This institution will be asked to weigh in on public spending, with an eye toward protecting our economy from inflation.

To reduce running expenditures, we propose cuts from Chapter 1000 of the budget, dubbed “Personal Services,” which amounts to 1.1 trillion pesos (US$60 billion). We would cut this sum by 11 percent, or 132 billion pesos (US$7.2 billion). Most of this sum currently goes toward salaries and discretionary payments. At present, there is no transparency regarding the true income of public officials; the real figures are hidden behind bonuses. In 2017, there are 1,766,191 public servants employed, earning a combined 740 billion pesos (US$40.3 billion), 64 percent of the total cost of “Personal Services.” We shall implement full economic transparency in each branch of the federal government, in keeping with Article 127 of the Constitution.